Cimpress 2027 Q1 Earnings Call

Welcome to the Cimpress Q1 FY 2027 earnings call. I am Meredith Burns, Vice President of Investor Relations and Sustainability. Thank you everyone for joining us. With us today are Robert Keane, Founder, Chairman, and Chief Executive Officer, and Sean Quinn, EVP and Chief Financial Officer. We appreciate the time that you have dedicated to understand our results, commentary, and outlook. This live Q&A session will last about 45 minutes or so, and we will answer both pre-submitted and live questions. You can submit questions live via the questions and answers box at the bottom left of the screen. Before we start, I will note that in this session, we will make statements about the future. Our actual results may differ materially from these statements due to risk factors that are outlined in detail in our SEC filings and the earnings document we published yesterday on our IR website.

We have also published non-GAAP reconciliations for our financial results on our IR website. We invite you to read them. Now I will turn things over to Robert.

Thanks, Meredith, and thank you all for joining us today. As I noted in my letter to last night's earnings release, first quarter fiscal 2027 financial results were below our expectations. That being said, we remain confident in the financial results we will deliver for the full fiscal year because, as we mentioned at the start of the fiscal year and as we reiterated at our investor day, we set our fiscal 2027 public guidance below the plan we are working toward internally. The first quarter has not changed our view that we will deliver that significant profit and cash flow growth in fiscal 2027, and that the expansion will continue through fiscal 2028 and beyond. That said, the world is uncertain, and we are able to achieve deeper cost reductions because of the strong progress on the efficiency foundations which we have been working on for the past year.

We are accelerating cost reduction measures as an insurance plan for meeting our financial goals. Put simply, we remain confident in our fiscal 2027 guidance, and our board, our executives, and the leaders of our businesses and central teams are all aligned on that, and we all take seriously the guidance commitments we have made to our shareholders and debt holders. Now, let me spend some time on examples of the many areas of progress we are making and are excited about, consistent with the themes we laid out in our September 30th Investor Day. This all gives us further confidence that we are doing the right things to deliver amazing customer value while also driving to our financial targets. First, we are growing high-value customer wallet share through elevated products.

In VistaPrint in Q1, we grew variable gross profit per customer 7% year-over-year, and the variable gross profit from customers who generate more than $650 in annual VGP grew by 15%. Also, in Q1 versus the same quarter last year, our packaging business, BoxUp, grew its revenues with external customers by 16%, while also more than doubling its cross-Cimpress fulfillment revenue to VistaPrint. VistaPrint, in turn, is using the BoxUp product range to grow its own high-value packaging customers. These examples illustrate a fundamental transition of Cimpress' per customer lifetime value, which we've been speaking about for the past several years. We are successfully building on our foundational capabilities that traditionally addressed only a relatively small portion of our total addressable market. We are becoming a branding partner to our customers thanks to our expanded product range, improved site merchandising, and service tailored to high-value customer needs.

We are earning customer trust for a much larger portion of the small business marketing wallet, which means they become much higher LTV customers for Cimpress. That is an important tailwind for our future of healthy growth. Although the headwinds from our legacy products and our traditional base of small, low LTV customers are currently offsetting tailwinds from high-value customers, the mix of our gross profit is shifting steadily towards high LTV customers. A second theme from our investor day was that our investments are widening our manufacturing and supply chain advantage. For example, in VistaPrint in the European operations, we went live with a new production line that has slashed the cost of producing beautiful full-color corrugated boxes. In the U.S., Pixartprinting has launched and is growing fast with booklets, catalogs, magazines, and roll labels produced in its new Pennsylvania facility.

We are rapidly increasing the output of two new production facilities in Mexico that combine highly productive state-of-the-art capital equipment with low-cost operations. Third, we are developing new channels to reach customers. A great example of our new channel development is our strategic partnership with Canva, which we continue to nourish by launching in new geographic markets and especially by growing the product footprint, and through our work to create a deep technology integration for the benefit of Canva customers and our production volumes. Fourth, we are gaining confidence in the benefits we are and will drive from the closer collaboration between VistaPrint, National Pen, and BuildASign. This collaboration includes anticipated OPEX savings from moving to a shared technology platform, the acceleration of our momentum in promotional products, apparel, and signage, and optimization of advertising spend across the brands of these three businesses.

We expect to see additional and significant financial benefits of this tighter collaboration in the coming quarters. Fifth, we are applying AI to drive growth and efficiency. We see AI becoming a significant tailwind for Cimpress. By democratizing design, it is expanding the online opportunity for customized physical marketing products. We are making focused investments in LLM discoverability and agentic commerce efforts to make us faster and lower cost while expanding the top of our funnel. AI is helping us become more efficient in all of our operations, which is enabling us to achieve and accelerate our planned cost reductions. Sixth, our tuck-in acquisitions are on track to deliver the value that we discussed at our Investor Day. Recent acquisitions in our Upload & Print segments performed in line with our expectations and positively contributed to our reported growth rates.

PrintBrothers grew revenues by 28% on a reported basis, while The Print Group grew 13%. To close, the Q1 headline numbers reflected specific headwinds, but do not change our conviction for this fiscal year or for our long-term trajectory, which is firmly on track. We have clear plans across our teams to achieve FY 2027 and FY 2028 strategic and financial goals, and we remain positive on our prospects for growing per-share cash flows, anchored by a durable, scale-based, and innovation-forward competitive advantage in the mass customization of print. With that, I will hand it over to Sean to walk through the financial results and outlook.

Sean? Thanks, Robert, and thanks, everyone, for joining us for the call today.

I will start off with the quarter. It was a quarter that we did not meet expectations, as Robert alluded to. Revenue was $934 million, up 8% on a reported basis, with organic constant currency growth of 2%. That 2% was below our expectations. The difference between our reported growth and organic constant currency growth comes from the tuck-in acquisitions that we have done recently. VistaPrint's organic constant currency growth was 2%, with strength in PPAG, marketing materials, and packaging. Just to note, the backlog in VistaPrint was elevated at the end of the quarter, which we do expect to help revenue in Q2. Upload & Print grew reported revenue 23% combined, with organic growth of 4% combined.

Our all other businesses segment grew 17%, led by BuildASign and the Canva partnership, which is growing quickly, but not material yet to our consolidated results. Adjusted EBITDA was $89.8 million, down 9% from a year ago. Most of that decline came from the cost of continuing to build out our North American manufacturing network, where startup costs were $5.9 million higher year-over-year. In addition, we absorbed $4.2 million of duties and tariffs on certain goods sold to the U.S. customers, and we had $1.8 million of higher energy-related input costs net of pricing. We also had $1.4 million of impact from the nonrecurrence of a compensation benefit in the year ago period. Those headwinds there, from a cost perspective, were partly offset by $7.5 million of IEEPA tariff refunds that were related to prior periods.

As we noted in last night's release, we expect the year-over-year impact of both manufacturing startup costs, but also the new Canadian tariffs to reduce in the second half of this year. From a segment perspective, I just wanted to point out that the new duties and tariffs, the cost there weighed primarily on VistaPrint, but the refund benefits were almost exclusively in National Pen. On cash, operating cash flow improved $3.9 million to $28.9 million for the quarter, driven by $10 million of lower net working capital outflows and also lower cash interest. Adjusted free cash flow was an outflow of $9.3 million. That was an improvement of $8.5 million versus last year, reflecting the operating cash flow improvement, but also lower capital expenditures and capitalized software.

Turning to the balance sheet, net leverage at the end of the quarter was 3.2 times trailing 12 months EBITDA, as calculated under our credit agreement. That is up slightly from the 2.9 times at the end of fiscal 2026, and the primary reason for that increase is the Saxoprint acquisition that closed at the beginning of July. I should note that that leverage calculation does not reflect the expected proceeds from the sale-leaseback of the acquired facility as part of that acquisition. We ended the quarter with $120 million of cash and $35 million drawn on our $250 million revolver, which we used to partially fund the acquisition. So liquidity remains strong, and as a reminder, we have no material debt maturities until fiscal 2033. Let me turn to the outlook now.